{alltv} Sky challenged over pay-TV movie dominance

LONDON (Reuters) - Britain's Competition Commission set out measures to make the pay-TV movie market more competitive and break Sky's stranglehold, a further blow to the broadcaster that is struggling to placate investors after News Corp's bid fell through.

The regulator said on Friday Sky's large subscriber base gave it an advantage that meant potential rivals found it difficult to bid successfully for the rights to first-run Hollywood movies.

This, in turn, meant that consumers found little alternative to Sky Movies for new blockbuster films, it said.

"Sky's control of this content on pay TV enables it to attract more pay-TV subscribers than its rivals and having more subscribers increases further its advantages when bidding in the next round for pay-TV movie rights, and so it goes on," said Laura Carstensen, who headed the commission's investigation.

The regulator said it was inviting responses to possible remedies that would be intended to enable more firms to secure pay-TV rights from the major six Hollywood studios.

Possible changes include restricting the number of studios from which Sky could license first rights, restricting the nature of those rights, or forcing Sky to offer rival movie channels to its subscribers.

BSkyB said in a separate statement: "BSkyB continues to believe that no regulatory intervention is required and that consumers benefit from high levels of choice, value and innovation across a wide range of providers."

It added that it would continue to engage with the commission.

UNDER PRESSURE

Last month, the satellite broadcaster said it would pay out 1 billion pounds ($1.6 billion) in a share buyback and dividend boost, as it tried to soothe investors after News Corp dropped its bid for the company when a tabloid newspaper phone hacking scandal caused national outrage.

James Murdoch, BSkyB's chairman, is under increasing pressure over the scandal, and News Corp executives are starting to think about the possibility that he may leave, sources told Reuters on Thursday.

BSkyB shares were down 3 percent to 615 pence at 4:50 a.m. EDT, their lowest level since June 2010, with analysts saying the announcement was negative but not a real surprise.

The ultimate outcome may be similar to the unwinding of Sky's exclusive rights to show Premiership football, put in place last April, said Patrick Yau at brokerage Peel Hunt. "Movies and sport are the key reasons subscribers come to Sky, so this will be a blow to the business."

Regulator Ofcom first referred the case to the Competition Commission in August 2010.

The Competition Commission said it would consider responses and publish a final decision by August 2012.

($1 = 0.607 British Pounds)